Understanding the relationship clients have with their money is key to helping them achieve their life goals — and to building long-term relationships with them. Understanding their attitudes and approaches toward money will prepare you for any unplanned decisions they may make.
Your goal should be to reach a stage at which your clients will “call you about everything,” says Francis D’Andrade, vice president, private client services, at Forstrong Global Asset Management Inc. and author of the book Am I Going to Be OK?: Achieving Financial Comfort in Today’s World.
For example, a client suddenly decides to quit his job and head off to Africa to help the poor. “Would you have seen that coming?” D’Andrade asks. “How would it affect the plan you put in place to achieve his money-related goals?”
The client was not thinking about money when he made this decision, although the decision to do philanthropic work in Africa would have money-related consequences.
“The client would most likely remember their experience in Africa for as long as they live,” says D’Andrade. In this case, he adds, the client is driven more by the experience he wants to have than by money.
Most advisors know the empirical facts about their clients’ financial affairs, such as their income, savings, investment objectives and risk tolerance, as noted in the “know your client” questionnaire.
But finding out about the personal relationship your clients have with their money requires much more. You must delve deep into their lives to discover — and, periodically, re-discover — their attitudes and behaviours toward money.
Advisors simply don’t know enough about their clients, D’Andrade says. “They make inferences about what they know based on their experience from a 30,000-foot level,” he says. “They are more like a family physician than a specialist.”
To learn more about your clients’ relationship with money, you must ask them questions that are both related to and seemingly unrelated to money. The answers you get will be unique to each client.
Here a few examples of questions that would give you greater insight into the influences and experiences that have shaped your clients’ relationship with money:
> What would you like to achieve in life, with or without money?
A client may tell you that money can buy a lot of things but not necessarily the things they really want in life. So, their relationship with money might not be as strong as would be the case with someone who believes the more money they have, the happier they will be.
> What money values did you learn from your parents?
Your clients may have acquired a savings habit and a tendency to avoid risk from their parents. Or their parents may have been successful risk takers. Your clients may or may not share their parents’ attitudes.
> Can you tell me your top five objectives over the next five years?
Are your client’s answer to this question purely financial, completely unrelated to money, or both?
See: Use life planning to build deeper relationships
> Can you recall what problems you encountered in life that could have been avoided if you had made better financial decisions?
A client could say financial decisions did not result in any problems, or completely blame all their problems on poor decisions.